Image: Jim Jubak

Jim Jubak

At his press conference after Wednesday's meeting of the Federal Reserve's Open Market Committee, Fed Chairman Ben Bernanke said that employment is picking up -- at a frustratingly slow pace.

I think that's dead wrong, and not just because the official unemployment rate climbed to 9.1% in May from 9.0% in April and 8.8% in March.

The numbers now show that the jobs problem in the U.S. isn't simply cyclical unemployment -- the kind the rises and falls with the cycles of the economy -- but also a rise in structural unemployment -- the kind that doesn't go down very much even when the economy picks up. The kind of patience that Bernanke advocates is absolutely the wrong medicine for an increase in structural unemployment.

Right now the numbers are starting to show a troubling and startling divergence: The number of job openings is rising, but the number of people working isn't climbing nearly as fast.

It looks increasingly like one "gift" from the Great Recession is a rise in the permanent unemployment rate, even in a good economy. That will mean more people out of work for the long term, with all the pain that imposes on those workers and their families. And it will mean that the U.S. economy as a whole will grow more slowly than in the past -- and than it might have without the damage inflicted by the Great Recession.

Remember 4.6% unemployment?

You know all about cyclical unemployment by now. The official unemployment rate, which doesn't include discouraged workers who have stopped looking for work or workers with part-time jobs who would like full-time employment, stood at 9.1% in May 2011. Way back in 2007, before the global financial crisis and the Great Recession, the official unemployment rate was 4.6%. In 2008, as the recession started to bite, it climbed to 5.8% and then, in 2009, it rocketed to 9.3%.

The unemployment rate follows, with some lag, the economic cycle. In 2007, the economy grew at an annual 3.2%, 2.3%, and 2.9% rate in the second, third and fourth quarters, respectively. In 2008, the annual growth rate dropped to a negative 0.7% in the first quarter, rebounded to a not-terribly-robust (but at least positive) 0.6% in the second quarter, and then fell off a cliff in the third quarter, dropping at an annual rate of 4% before finishing the year at a negative 6.8%. The next year started grimly, with the economy shrinking at a 4.9% annual rate.

But the unemployment rate hasn't dropped very much as the recovery from the Great Recession has progressed. The post-recession unemployment rate did dip briefly to 8.8% from a high above 10%, but now it seems stubbornly stuck above 9%. That's after a 5% annual growth rate in gross domestic product in the fourth quarter of 2009 and growth rates of 3.1% and 3.7% in the first and fourth quarters of 2010.

Why hasn't unemployment shrunk?

That's been a big puzzle to economists. The explanations are all over the political and economic map: The 2009 economic stimulus package was too small. Or too big. Businesses are reluctant to hire because of inconsistent or intrusive regulation. The continuing decline in housing prices has sapped consumer confidence and spending. Rising income inequality has put a huge burden on the middle class. And on and on.

What most of these explanations share, however, is a belief that unemployment would shrink as the economic cycle shifted from recession to growth -- except that something has happened this time to interfere.

A very few voices have worried that maybe the slow recovery in job growth from the Great Recession is a sign of structural problems. And that's looking more and more likely.

For instance, in the manufacturing sector, which has led the economy during the recovery, the number of jobs has declined since January 2009, but the number of available job openings has climbed to 230,000 from 98,000. Manpower, the employment company, reports that 52% of leading U.S. companies report difficulties in hiring essential staff. In 2010, Manpower's survey showed 14% of companies reporting difficulties. McKinsey Global Institute found in a survey of 2,000 companies that 40% had positions open for at least six months because they couldn't find suitable candidates.